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Venture Predation

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Re: Venture Predation

#51

Post by SOLAR_FIELDS »

conjecTech wrote: post #43
brookst wrote: post #32

Earlier quoted context omitted.

Eh, there is alot more nuance here. Dumping is typically when an established company attacks a competitor with temporarily low prices. If you squint right, sure, VC backed low costs could be seen as dumping. But the problem is that also means virtually every startup is dumping, even bootstrapped garage efforts. And I guess any company that reports a quarterly loss is also dumping. So I think it probably makes sense t…

No, there isn't much nuance here. Accounting has notions of fixed costs and marginal costs. The startups you are referring almost all lose money on fixed costs, but sell things at per-unit economics which make sense at scale because they are below marginal cost/COGS. Things like Uber are a typical dumping cases. For years, they charged below their COGS and eventual profitability depended on driving out competition an…

Circa 2015, Uber charged roughly $30 USD for a trip to the airport from my house. Now it is usually between $60 and $70. There has been significant inflation, but $30 in 2015 is only worth about $38 today.

Re: Venture Predation

#53

Post by potatolicious »

brookst wrote: post #32
nico wrote: post #20

In international trade this is called “dumping”, and it’s often considered illegal and most definitely unfair It’s usually used as a reason for regulating imports/exports https://www.investopedia.com/terms/d/dumping.asp#:~:text=Dum... .

Eh, there is alot more nuance here. Dumping is typically when an established company attacks a competitor with temporarily low prices. If you squint right, sure, VC backed low costs could be seen as dumping. But the problem is that also means virtually every startup is dumping, even bootstrapped garage efforts. And I guess any company that reports a quarterly loss is also dumping. So I think it probably makes sense t…

Ehhh I dunno if it's really that nuanced. Companies that are unprofitable, but who sell goods/services above direct costs, are relatively (though of course never totally) safe from the accusation of dumping.

i.e., if you sell a widget for more than it costs to manufacture, but unprofitable after you account for indirect costs like R&D and other corporate costs, it may or may not be dumping.

The VC-backed companies like Uber weren't doing this. They were unprofitable even under the standard of price > direct cost. That's pretty cut and dry dumping.

"Scale until you become profitable" in the traditional (and IMO defensible and sound business) sense is about scaling until your margins cover your fixed and indirect costs like R&D (see: Google, Facebook), but that's not the Uber model.

Re: Venture Predation

#54

Post by mustacheemperor »

satvikpendem wrote: post #25
seanhunter wrote: post #21

Earlier quoted context omitted.

I can't escape the feeling that it boils down to the old classic 3 stage business model: 1. collect underpants 2. ? 3. Profit Uber and Lyft are great examples. They haven't established long-term stickiness with drivers or passengers. So if either of those groups get offered a better deal they will switch. Therefore it's just a relentless race to the bottom with no sustainable business in sight.

Exactly. Well, I'm not complaining at my VC funded rides though, it's a great transfer of wealth from the rich to the poor, ie me, lol.

I wonder what the relative scale of that wealth transfer is compared to the transfer of wealth involved with leveraging the motor vehicle equity of drivers into profits for wealthy investors.

Edit: per reply, “income” would be a better word

Re: Venture Predation

#55

Post by [deleted] »

derefr wrote: post #44
lesuorac wrote: post #35

Earlier quoted context omitted.

I don't think you have to squint very hard to see VC as dumping. It's why they all follow that common trend of low-price growth hacking and immediately follow up by raising prices.

> It's why they all follow that common trend of low-price growth hacking and immediately follow up by raising prices. The key difference is that startups are rarely selling the same product, to the same people, for different prices at different phases of growth. They're more often selling different products, with different positioning, to different market segments at different times in their growth; where they just h…

[deleted]

Re: Venture Predation

#56

Post by jjeaff »

conjecTech wrote: post #43
brookst wrote: post #32

Earlier quoted context omitted.

Eh, there is alot more nuance here. Dumping is typically when an established company attacks a competitor with temporarily low prices. If you squint right, sure, VC backed low costs could be seen as dumping. But the problem is that also means virtually every startup is dumping, even bootstrapped garage efforts. And I guess any company that reports a quarterly loss is also dumping. So I think it probably makes sense t…

No, there isn't much nuance here. Accounting has notions of fixed costs and marginal costs. The startups you are referring almost all lose money on fixed costs, but sell things at per-unit economics which make sense at scale because they are below marginal cost/COGS. Things like Uber are a typical dumping cases. For years, they charged below their COGS and eventual profitability depended on driving out competition an…

The only issue is that companies like Uber are lying to themselves and their investors that costs will go down significantly in the future. Both through scale and advances in technology. Which is true. But rarely true to the extent to which they believe it.

Re: Venture Predation

#57

Post by tootie »

nico wrote: post #20

In international trade this is called “dumping”, and it’s often considered illegal and most definitely unfair It’s usually used as a reason for regulating imports/exports https://www.investopedia.com/terms/d/dumping.asp#:~:text=Dum... .

We also call it "selling dollars for fifty cents"

Re: Venture Predation

#58

Post by Aunche »

ethbr0 wrote: post #41
brookst wrote: post #32

Earlier quoted context omitted.

Eh, there is alot more nuance here. Dumping is typically when an established company attacks a competitor with temporarily low prices. If you squint right, sure, VC backed low costs could be seen as dumping. But the problem is that also means virtually every startup is dumping, even bootstrapped garage efforts. And I guess any company that reports a quarterly loss is also dumping. So I think it probably makes sense t…

> different economic phenomenon that needs different rules than if e.g. Goodyear sells tires at far below cost in California until competitors leave and then they raise the price. What's the end game to VC subsidies? There are many VC-backed businesses where 'Scale until you become profitable' is the end goal. But there are also many where 'Outlast until competitors leave and then raise the price' is the only plausib…

> What's the end game to VC subsidies?

I don't think VC's give a damn about long-term profitability. All they want to do is to trick later investors into buying them out. I can't think of a single one of these types of companies that has had a profitable year* let alone make enough profit to recoup their losses.

*I'm excluding AirBNB because their prices are cheap by operating in a legal gray-zone.

Re: Venture Predation

#59

Post by WaitWaitWha »

Best part in my opinion?

One of the requirements in the RFP was "Windows to View Our Home Planet and the Moon".

The last sentence is "They must be present and cannot be substituted".

Re: Venture Predation

#60

Post by satvikpendem »

mustacheemperor wrote: post #54
satvikpendem wrote: post #25

Earlier quoted context omitted.

Exactly. Well, I'm not complaining at my VC funded rides though, it's a great transfer of wealth from the rich to the poor, ie me, lol.

I wonder what the relative scale of that wealth transfer is compared to the transfer of wealth involved with leveraging the motor vehicle equity of drivers into profits for wealthy investors. Edit: per reply, “income” would be a better word

It's not profits though. Investors are paying more than the value of the ride to the driver. Now whether that offsets the depreciation of the vehicle over time, I don't know the numbers on that.
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